The oxidative contraction of α‐formal ketone to form continuous all carbon chiral centers promoted by H2O2 is widely used in natural product total synthesis. Typically, using this transformation, chiral cyclic ketones are obtained as the major products and ring‐opening products as the minor products. Herein, DFT calculations have been used to investigate the detailed reaction mechanism and chemoselectivity. In addition, with the widely accepted mechanism of H2O2‐promoted transformation, our systematic investigation with various explicit‐solvent‐model calculations for the first time shows that H2O and H2O2 are comparable at catalyzing the rate‐determining step of this reaction, which emphasis the importance of solvent effect in such transformations. It is found that both the less ring‐constrain and a later transition state in an exothermic reaction account for the origin why the reaction favors ring‐contraction pathway rather than ring‐opening one. By a comprehensive analysis for the substituted groups, it has been disclosed that the steric effects of the substituted groups on R2 and R3 contribute to the selectivity with larger steric hindrance favoring the chiral cyclic products. Moreover, the electronic effects on R1 but not R3 affect the selectivity with electron‐donating groups leading to the cyclic products. Based on our calculations, some predictions for higher selectivity have been made.